Contracts CLU3M – Understanding Canadian Law

 We will learn the process and limitations on making contracts in Canada. Learning Goals

 We will know we have succeeded when we can identify the key elements of contracts, define key terms related to contracts, and say what limitations exist on legal contracts. Success Criteria

 What’s in the news?  Contract Handout  Contract Crossword  Text Assign Agenda

What’s in the News?

Contracts  A contract is a voluntary agreement between two or more parties, that creates a legal relationship and creates legally enforceable obligations upon the parties to a contract.  Privity - only parties to a contract can enforce a term or condition of a contract.

What three ingredients are in every cake? EGGS FLOUR SUGAR

What three ingredients are in every contract? A C O CONSIDERATION

Offer  1. Offer - a specific serious proposal, that, if accepted, leads to a contract. Question: What are some ways a person might offer a contract?

Acceptance 2. Acceptance of an offer must include three aspects:  it must be communicated clearly or indicated by action  it must occur in a fashion specified in the offer  it must be unconditional, without changes. Question: What are some different ways that a person might accept an offer?

Consideration 3. Consideration - must include something of value given and received by each party. Questions:  Why might a city sell a building for $1?  If I sell you my car, what is the consideration?  If your neighbour hires you to cut their grass, what is the consideration?  If I agree to watch your cat as a favour to you while you’re away on vacation, and I don’t do it and the cat dies, can you take me to court for breach of contract?

Capacity to contract  According to common law, not all individuals are legally entitled to enter into contractual agreements.  A diminished capacity to contract is applied to:  minors (those below 18 years of age)  persons with mental disability and  intoxicated persons.  The intent is to protect individuals who may not have the ability to make decisions in their own best interest. Question: What can minors make contracts for?

Genuine Consent  According to the common law, consent to a contract must be genuine. The contract must not occur under any of the following circumstances:  misrepresentation - when a statement about a material fact, or key piece of information relating to a contract, is communicated creating a false impression, misrepresentation has occurred and genuine consent has not occurred.  mistake - a contract may be considered invalid in the event that any of three types of mistake occur:  common mistake - both parties to a contract are in error about the same key fact relating to the contract  mutual mistake - both parties to a contract have different understanding of the material subject of the contract  unilateral mistake - whereby one party to a contract makes a mistake which will unfairly advantage the other party to a contract.  duress or undue influence - if threats or violence has influenced a party to the contract, or if a party to the contract has been in any other way improperly pressured into the terms of a contract.

Illegal Contracts  In order to be a legally enforceable contract, the requirements of an offer, acceptance, consideration and genuine consent must be present, along with the intention to create an agreement that is legally binding.  However, there are certain types of contracts that are void and unenforceable even when these criteria have been satisfied.  Such contracts are considered illegal contracts, and include:  contracts violating statute law  contracts against public policy

Ending a Contract  In most cases, a contract is completed, or discharged, when both parties have completed their obligations under the terms of the contract. This is known as discharge by performance.  However, contracts may also end in other manners, including by:  agreement, whereby parties to a contract agree to release each other from contractual obligations  impossibility of performance, whereby conditions change to the extent that contractual fulfillment cannot result in the original intentions of the parties to a contract  breach of contract, whereby one party fails to fulfill obligations agreed upon in the contract.

Legal Remedies  When a situation arises such that one party breaches a contract, the other party to the contract may apply to the court for a remedy. The courts may choose to:  award damages to the injured party, although it is the obligation of the injured party to attempt to lessen or mitigate any damages where possible (the most common result)  order specific performance, whereby the court may order completion of an original contract  order an injunction, compelling a party to do, or not to do, some particular action associated with the contract.  In Canada, the law of contract focuses primarily upon private ordering between parties. The practice of the court is to stay out of private business dealings, to be involved only when necessary to provide interpretations and remedies according to the rule of law.